Category Archives: Debt

Create a Winning Action Plan to Reduce Your Financial Stress

If we were to conduct an informal poll on the street today and ask people what they are most stressed about, money would be one of the most common responses. It is easy to assume that financial stress exists only for low income families or those dealing with some sort of unusual crisis, but the truth is that everyone, rich or not, deals with financial stress on a regular basis. In fact, many people literally become ill because of their money worries.

A 2015 study by the American Psychological Association revealed that money is the leading cause of stress among adults under age 49. Respondents reported losing sleep over their worries, experiencing elevated blood pressure, and the compulsion to check their account balances, among other side effects.

I can attest to the cold fact that financial stress is scary, even crippling. I’ve experienced a wide gamut of money-related worries myself, including health concerns, job loss, and student loan debt. Each time, the burdens I experienced impacted my ability to function normally.

When we experience financial stress, the psychological weight of our worries not only impacts our abilities to perform usual day to day functions; it also makes it much more difficult to form and act on a plan to wipe out the cause of the financial stress.

If you’re feeling overwhelmed or burdened by your financial situation, whether it involves job loss, enormous debt, feeling stuck in your job, or lack of a long-term game plan for your money, your situation is not hopeless. Set aside a block of time, grab a pad of paper, and follow the steps below to create an action plan to crush your financial stress.

Money is the leading cause of stress in the world today. You can reduce your financial stress by creating a winning action plan today! This guide is a quick read and the steps described take only minutes to complete.

Where to Start? Write Down the Causes of Your Financial Stress

When you are stressed about money, it can sometimes be difficult to pinpoint the exact causes. You may be dealing with immediate, time sensitive stress, like debt collectors and their annoying phone calls or late payment notices in the mail. You may be overwhelmed by long-term tasks that you’ve been putting off for years, such as getting life insurance, forming a will and trust, or refinancing your mortgage.

The best way to start to eliminate your financial stress is to do a brain dump. Grab a pad of paper and create a specific numbered list of everything money-related which is currently causing you to experience stress.

It can include things like regular bills, insurance matters, car registrations, taxes, mortgage refinancing, life insurance needs, scheduling medical appointments, and grocery shopping. It may also include far-off future events to plan for, such as weddings, college, retirement goals, long-term care plans, estate plans, and more.

When you create this list, remember: nothing is off limits! If it involves money and it is bothering you, write it down!

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Scan Your List for Quick Wins

Once you’ve finished your list, scan through it several times to look for quick wins, i.e. items that you can tackle right away to reduce your stress. For example, if you have a stack of unpaid bills sitting on your desk, pay them right away and set-up auto pay with your bank to avoid future stress.

From here on out, make it a habit to take care of future quick win items as soon as they arise. The following guidelines should help:

  • When bills arrive in the mail, pay them right away.
  • Handle all mail items only once. When you open it, decide right away what action is necessary based on the nature of the mail, i.e. pay the bill, file the document for later use, or shred it.
  • Schedule reminders in your calendar or mobile device for any time-sensitive financial events.

Rank Remaining Items

Now that your list of items causing financial stress is smaller, it is time to rank remaining items according to their priority. The most effective way to do so is by ranking items according to their urgency and overall importance.

To rank the remaining items by urgency, or time sensitivity, use a scale of 1-5. Rank items which are not time sensitive as a “1” and urgent items as a “5.”

Next, rank your items according to their overall importance in terms of financial weight. This extra step will serve as added protection to make sure that expensive and potentially costly items don’t slip through the cracks (i.e. missing a mortgage payment, failure to pay your federal tax obligations, etc.).

At this stage, it is easier to rate and sort the remaining sources of financial stress according to the four quadrants below.

Transferring the items on your list to the chart above will provide a visual action plan and reduce your financial stress because you will be able to clearly see what action is needed. Start by addressing the Urgent/Important quadrant, then Urgent/Not Important, followed by Not Urgent/Important and Not Urgent/Not Important.

The Best Way to Reduce Financial Stress

The method described above is not a magic bullet to prevent financial stress, but it does represent a simple and effective plan to reduce it in a manner of minutes.

No matter what obstacles your present situation has placed in your way, the presence of an action plan can provide the hope that you need to channel your emotions into action. Grab a pad of paper and pen and create your plan today!

How do you cope with financial stress?

Money is the leading cause of stress in the world today. You can reduce your financial stress by creating a winning action plan today!

Why College Isn’t For Everyone

These words are difficult for me to write. But in this season of graduation parties and commencement ceremonies, they need to be written: College isn’t for everyone.

I am a public school teacher who holds both BA and MA degrees. My mother earned her Associates degree, and my father completed his GED. They encouraged me to pursue higher education because they wanted me to live the best life possible.

My wife and I are small business owners. We owe much of our success to the excellent educations we received. In fact, we wouldn’t be where we are today without those experiences.

Despite the obvious impact of education in my life, I still believe college isn’t for everyone.

College and career options have been on my mind, in local Chicago news, and in the national news thanks to New York and news of free college tuition. A recent student petition at Naperville North High School has shed light on the enormous pressure being placed upon students to do everything possible to improve their chances of getting into a good college.

As the petition points out, the problem is that not every student will follow the college pathway. Underneath the steady buzz of the message that college is the only path toward success, many students are left wondering how to fit in now and move forward after school.

Encouraging every high school student to go to college is incredibly irresponsible, yet it happens – and not just in communities like Naperville. What follows is similar to pushing a square peg into a round hole. Countless students finish high school, wander aimlessly into college because it is expected, take out thousands of dollars in student loans, and then drop out after three semesters.

Why does this happen?

College isn’t for everyone.

The "college or bust" mentality misleads students, disrespects skilled trades, and promotes a dangerous lie: college isn't for everyone.

The Obvious Problems

As recently as a few decades ago, most communities respected a student’s decision to join the work force right away after high school. Many students found their niche in jobs in manufacturing, local agriculture, and trade skills, paid their dues, and moved up the ranks within their companies over time.

In the past, these career pathways were considered both valid and highly respected. Today, many communities stigmatize these jobs and teach their children that they deserve “better.”

There are two clear cut problems with this mentality:

  1. If everyone were to go to college, communities would face a dire shortage of plumbers, welders, automotive repair specialists, roofers, builders, handymen, electricians, HVAC technicians, and many other important cornerstone jobs.
  2. Jobs that require college degrees are in no way “better” than those with less education requirements. In fact, many skilled trades which don’t require a college education offer greater earning potential.

At its core, this “college or bust” mentality is extremely damaging and out of touch with reality. It places undue pressure on kids to begin resume building and choosing a career path as early as middle school.

And worst of all, it encourages young people to chase empty prestige while missing an opportunity to identify their passion and purpose.

The Consequences

When students decide to attend college, they understandably focus on their future career enjoyment, earnings, and quality of life. Those visions rarely account for the potential reality that their future just may be a life of student loan debt and no degree.


For many students, college is potentially the most costly mistake they’ll make in their lifetimes. They will lose years of earning potential and reduce the power of compounding interest in their investment portfolios.

I have several friends who took out student loans to attend college, some for as many as six years, and never completed their degrees. Some of them are too lazy to finish up a class or two to complete their programs, while others floundered from major to major every semester before calling it quits.

Each one of them wasted several years of their young adult lives taking upon debt to receive educational training which provides limited or no economic benefits to them today. Their embarrassment and regret are noticeable.

A Degree is Not a Guarantee

In high school, I distinctly remember being told many times that earning a college degree was a guaranteed ticket to a successful future. This is still taught in most schools today. The sad truth is that while a college degree offers many opportunities for career and earnings advancement, nothing is guaranteed.

I have many friends who went to college for 4-5 years, earned their degree, and now are not even using it due to one reason or another. Some of them realized they had pigeon-holed themselves into careers they hated. Others had made errors in calculation. A few people unexpectedly found themselves in dying or down job markets.

The disillusionment and anger these friends experience is both understandable and noticeable. Many of them are no closer to finding a career they love than when they finished high school. They have nothing to show for their years of studying, other than a punched ticket to the 10 year student loan debt club.

The Solution

The stigma that college is the only way needs to change. It is time for communities, school districts, and parents to acknowledge and promote the obvious truth: college isn’t for everyone after all.

Many communities already understand this and are taking active steps to help every high school graduate be prepared for what lies beyond high school. I am fortunate to live and teach in a school district which seeks to serve all of its students by providing options and training to those who wish to join the work force upon graduation. Every day, I count it a blessing that my former students have not been led to believe that college is the only pathway to success.

If you are fortunate to have a teenager or young adult in your life, please take the opportunity to remind them that college isn’t for everyone. Your words may empower them to shed family and peer pressure and choose a path which better aligns with their goals and strengths.

Do you believe everyone should attend college?

7 Critical Ways Dave Ramsey is Right About Money

Dave Ramsey is one of the biggest household names when it comes to personal finance experts. His story and teachings have helped millions of people get out of debt and build a well-balanced financial position, and his books, radio show, columns, courses, and videos are among the most popular personal finance materials available. Even so, a vocal contingent of critics question whether Dave Ramsey is right on many key issues.

Ramsey is not bashful about his strongly-held beliefs. He strongly opposes debt (other than 15 year mortgages in which the monthly payment is no more than 25 percent of a family’s take home pay), leads the charge against credit card use, and encourages people who are ridden with debt to pay off their obligations in order beginning with their smallest debts rather than base repayment on interest rates.

Millions of people have followed Ramsey’s Seven Baby Steps to achieve financial success, yet his advice is more widely-criticized than many other financial experts.

If you’re looking for a financial guru to follow, Dave Ramsey is certainly a popular choice. His advice is not always easy to follow, but it is difficult to argue with his results.

Read on to consider 7 ways Dave Ramsey is right about money – even in the face of criticism.

Dave Ramsey is one of the biggest names in personal finance, but he is criticized widely for many of his teachings. Read on to see 7 critical ways Dave Ramsey is right - and his critics are wrong - about money.

7 Ways Dave Ramsey is Right – and Others Are Wrong

Dave Ramsey is the first to admit that his life story and beliefs may be strange to some people. Through a rapid-rise in the real estate career, Ramsey became a millionaire by age 26 and promptly lost everything in bankruptcy soon after.

Writes Ramsey,

I was making $250,000 a year. That’s more than $20,000 a month net taxable income. I was really having fun. But 98% truth is a lie. That 2% can cause big problems, especially with $4 million in real estate. I had a lot of debt—a lot of short-term debt—and I’m the idiot who signed up for the trip.

When the dust finally settled, the resilient Ramsey was determined to recover and learn from his mistakes and help others win with money.

His Advice is Rooted in Experience and Research

Among the ways Dave Ramsey is right, it is most important to note that his teachings and philosophies are based upon both personal experience and expert research. Critics and competitors love to paint Ramsey as a fraud, but the truth is that he lived through the trials and struggles that his followers face and came out on top.

When Ramsey lost everything, he started a mission to learn everything he could about personal finance. He read every relevant book he could get his hands on, interviewed countless people who had experienced financial success, and acted upon everything he learned.

From the rubble, Ramsey created a framework that has helped millions of people, himself include, pay off debt and build wealth.

An Expert Motivator

While many financial experts take a strictly academic approach to personal finance, Dave Ramsey understands that motivation to get started is a foundational piece of each person’s financial journey. He is an expert when it comes to empowering people who want to change – as he puts it, those who are “sick and tired of being sick and tired” – and motivating them to take action.

The short video below is a great example of his ability to motivate people to take action.

Saving is the Best Way to Get Started

In Financial Peace University, Ramsey teaches students to build a $1,000 starter emergency fund before doing anything else with money. He calls this action Baby Step One.

Dave Ramsey is right when advising people to start with saving because it is an effective way to initiate change and protect against financial emergencies which could cause people to go further into debt.

Much in the same way that a running coach would not expect a new runner to step out and run a marathon on day one, Ramsey helps people start improving their financial situation with slow and manageable change by encouraging saving.

Related Reading:

Quick Wins Are Contagious

On a related note, Ramsey understands that personal finance is not just mathematical, but also emotional, behavioral, and psychological. People are able to start his program and stick with it thanks to the power of quick wins.

Once people move on to paying off non-mortgage debt in Baby Step Two, Ramsey advises people pay off their debts from smallest to largest balance. Thanks to momentum and positive excitement, Ramsey Solutions reports that students pay off all of their debt in 18-24 months, on average.

Money and Multi-tasking Don’t Mix

Over the past decade, consistent research has emerged demonstrating that multi-tasking doesn’t work. According to Psychology Today,

  • Multi-tasking wastes time
  • It decreases accuracy
  • The human brain is not equipped to multi-task

Ramsey deserves credit for realizing this back in the 1990s and incorporating this understanding into the development of the Baby Steps.

Simply put, Dave Ramsey is right – multi-tasking with money is slow, ineffective, and expensive. It is far wiser to focus on one financial goal at a time, especially when looking to pay off debt.

A Budget is Critical

One of the most memorable aspects of Ramsey’s teaching lies in his tendency to repeat teachings in the form of catchy sound bytes. For example, regular listeners have heard Dave say the following many times:

Your biggest wealth-building tool is your income, and the best way to harness the power of your income is the monthly budget because everything else flows from the budget.

The importance of a budget is just one way Dave Ramsey is right when it comes to financial advice.
A look at Dave Ramsey’s recommended budgeting percentages (Credit: EveryDollar)

Though some experts argue otherwise, I believe Dave Ramsey is right – a budget is a fundamental component of a winning financial plan. 

The truth is that people who don’t budget are much more likely to become financial reactionaries who wonder where their money goes each month.

The word “budget” has taken on all kinds of unjust negative connotations. Many people believe that a budget is too restricting, a thing of the past, or something that only frugal or cheap people follow.

As Ramsey points out, other people are afraid to start a budget out of fear of what they might discover. However, the numbers don’t lie – people who create a budget pay off more debt and save more money.

Related Reading:

Leveraging Debt is Risky

Among the ways Dave Ramsey is right, his teaching on the dangerous risk of leveraging debt may be his most famous.

Even in a time of historically-low interest rates, Ramsey continues to preach the virtues of debt freedom. Why? Ultimately, a life void of debt is a life of minimal financial risk.

On his radio show, Ramsey frequently reminds audiences that 0% of homes without a mortgage are foreclosed on every year. He also is quick to quote the world’s second-richest man, Warren Buffet (“You can tell who was skinny dipping when the tide goes out”), when discussing investment risk.

While some experts continue to falsely teach that debt is a tool to be manipulated for gain, Dave Ramsey is right – very few wealthy people gained their wealth by leveraging debt, and those who did got very lucky.

Final Word

Dave Ramsey’s financial advice is not equally effective for people in all financial stages of life, but there is a reason his framework has helped millions of people get their finances in order. As Ramsey says, his plan teaches people a systematic, common sense approach to managing their finances “God’s and grandma’s way.”

Undoubtedly, Ramsey will continue to draw the ire of critics, but results don’t lie.

What Dave Ramsey advice resonates with you? How do you follow and implement his teachings?

The Best Resources to Refinance Debt and Pay It Off Faster

Millions of people feel stuck in debt. You might be one of them. The weight of payments could be crushing your motivation and hope. You might be wondering how you’ll ever pay off your debts, if you should refinance debt, and where to start sorting through your financial mess.

A recent NerdWallet study revealed that the average American household with any debt owes over $136,000 in debt including mortgages. The consequences of such high debt levels range from minor inconvenience to financial devastation. High interest rates, long terms, hidden fees, and cumbersome payments and have led countless people to a fork in the road: refinance debt to gain some breathing room or pay it off early.

I know exactly how awful the weight of debt can feel. My wife and I were drowning in over $17,000 of student loan debt as recently as 2016. We were two of the lucky ones; we were able to trim our budget and lifestyle, take a few steps to increase our income, and pay off this debt in only 54 days.

Related Reading: How We Paid Off $17,000+ in Just 54 Days

But this isn’t reality for everyone. Your circumstances might not allow you to pay off debt so quickly. You could be in debt so deeply that even paying minimum payments or interest payments is stressful or very difficult. Perhaps you’re already on a bare bones, beans and rice budget and still find yourself struggling.

Maybe you’re reading this because you know that the chance to refinance debt could be your last hope.

Should You Even Bother to Refinance Debt?

If you're in debt, the choice to refinance debt could be the spark to start paying it off quickly. Check out these helpful resources and crush your debt! We'll show you how to refinance student loans, use personal loans responsibly to refinance debt, review your options to refinance your mortgage before rates go up, and much more! If you're looking to stop wasting money on high interest payments to lenders, you need to read this article!Whether you have a car loan, mortgage with a high interest rate, home equity loan, or student loan debt, it may be possible to refinance debt and save thousands of dollars in the process. Unless you’re able to pay off your debts very quickly, you at least owe it to yourself and your family to see if you can save money by refinancing.

Please understand that refinancing debt is not a cure for the problem. When you refinance debt, you still have to pay it back. It’s addressing the symptoms, not the cause.

However, if you can pay back your debt on more favorable terms by refinancing, that’s a huge victory. It could reduce your monthly payments and free up money in your budget to pay down your debt much faster.

The decision to refinance debt shouldn’t be entered into on a whim, but when done correctly, it has the potential to change your life forever.

Imagine a life with no debt and no obligations. Imagine sending the money that you currently pay to creditors directly into investments and watching your money grow each year.

How great would it be to never have to work again because your investments are generating enough income to support all of your family’s needs?

The sad truth is that you’ll never know what that feels like if you continue to be stuck in debt. If you’re ready to get serious about paying off your debt and want to pursue refinancing to kick start the process, read on.

How to Refinance Debt and Jump Start the Payoff Process

Start by collecting your free credit report and credit score. You need to know this information when the time comes to apply with companies to refinance debt. Many companies list their credit score requirements for those looking to refinance debt, so you’ll want to know your information before applying. Also, you want to be sure that there are no inaccuracies on your report.

You can get your free credit report and score in a matter of seconds when you sign-up with Credit Sesame. It is 100% free. They won’t ask you for your credit card information, and their service is secure thanks to advanced encryption technology.

The best part about Credit Sesame is that their report will help you examine the big picture of your debts and determine which ones are worth refinancing and which ones aren’t. Also, you’ll be armed with accurate knowledge of your situation, which will put you in the best position possible to negotiate with lenders.

Sign-up for Credit Sesame for FREE here.

Most debt freedom experts recommend that you collect a credit report and score from multiple services simply to compare the two for accuracy. Another great resource for grabbing your score for FREE is If you’re looking to save money on an auto-loan refinance, they are a great place to start.

On the other hand, if you’re dealing with high amounts of credit card debt, MyFico may be able to help you kill two birds with one stone. Their Ultimate 3B Report pulls your scores and reports from all three major bureaus and will even help you analyze low interest credit card offers to reduce your rates and perform balance transfers.

You can learn more about MyFico's services here.

Next Steps

Now that you’re armed with your credit report and scores, you’re ready to get down to reviewing your options to refinance debt and speed up the repayment process.


At the time this article is published, mortgage rates remain low but are on the rise. According a recent CNBC article, mortgage refinance applications have been on the rise in recent weeks due to a projected increase in interest rates.  If you still haven’t taken advantage of these historically low rates, now is the time to apply and consider your options. You could save thousands of dollars over the life of your mortgage.

The quickest way to discover your refinancing options is to fill out a short form offered by GuidetoLenders.  After supplying your zip code and a few other basic pieces of information, you’ll receive a list of free, no obligation quotes. You can start the process here, or alternatively, you can use the calculator below.

Student Loans

According to Student Loan Hero, Americans owe over $1.4 trillion in student loan debt, spread out among about 44 million borrowers, and you may be one of them. Depending upon the year you graduated, your repayment rates may be between 3.4% and 8.25%.

Again, refinancing debt isn’t the magical solution to debt woes, but it can speed up your repayment process significantly. I consistently find that LendEDU offers the best look at refinancing options for people who are serious about saving money and getting out of debt as fast as possible. It takes about 90 seconds to fill out their quick form and receive quotes from up to 12 lenders, including Earnest, LendKey, and Citizens Bank.

Click here to check out your student loan refinancing options with LendEDU.

You should also check out direct offers from SoFi. If you qualify, you can receive a $100 welcome bonus when you complete your refinance. With current fixed rates as low as 3.375%, you could save thousands of dollars. Again, it only takes a few minutes to see if you qualify but you could save thousands of dollars.

Personal Loans

Finally, if you have miscellaneous debt from credit cards, auto loans, or other higher interest personal loans, it’s worth checking out available rates on personal loans from two companies I recommend. If you’re dealing with sky high interest rates, you really need to make this a priority.

Prosper is a peer-to-peer lender that may be able to help you depending on your unique circumstances. In the interest of full disclosure, they can be very helpful to some people and not so useful for others. However, it is free to check your rates and it will not impact your credit score, so you have literally nothing to lose by checking out your options.

Another similar option is available through Lending Club. With APRs as low as 5.99%, you could save hundreds or even thousands when you refinance high interest debt. Again, checking out your options is FREE and won’t affect your credit score.

Note: Lending Club even offers options for investors, too.

Final Steps

Whether or not you refinance debt on your journey toward debt freedom, know this: you can pay off your debts much faster than you think you can if you’re willing to plan ahead and sacrifice.  Refinancing your debts won’t solve your money problems, but it may be the spark you need to start the process of freeing yourself from debt forever.

Be sure to revisit the resources above, gather a few quotes to fully consider your options, and develop a plan of attack today. Life is too short to continue on as a slave to debt.

Have you refinanced debt in the past? Do you have any debt that you could refinance to speed up the repayment process and save money?

If you’ve experienced a refinance in the past, tell us about the experience!

If you're in debt, the choice to refinance debt could be the spark to start paying it off quickly. Check out these helpful resources and crush your debt! We'll show you how to refinance student loans, use personal loans responsibly to refinance debt, review your options to refinance your mortgage before rates go up, and much more! If you're looking to stop wasting money on high interest payments to lenders, you need to read this article!

If you're in debt, the choice to refinance debt could be the spark to start paying it off quickly. Check out these helpful resources and crush your debt! We'll show you how to refinance student loans, use personal loans responsibly to refinance debt, review your options to refinance your mortgage before rates go up, and much more! If you're looking to stop wasting money on high interest payments to lenders, you need to read this article!

7 Unmistakable Habits of the Rich

Our culture is intensely interested in wealth. We have a billionaire president, shows like “The Rich Kids of Beverly Hills” are huge hits, and sometimes it can be tough to tell if you’re watching the Nightly News or Entertainment Tonight. These superficial glimpses into the lives and habits of the rich have become a surprisingly vital part of the low information American diet.

Some watch the lives of the wealthy purely for entertainment purposes. Others are interested in smearing rich people for everything they do, almost as if possessing wealth is inherently immoral. “Oh, they have money?” they say. “They must be evil!”

Want to become wealthy? The best way to get rich is to study and implement the habits of the rich yourself. This article will give you everything you need to get started, whether it's time management tips, health tips, improving productivity, how to save money, how to build multiple income streams, and much more!A shockingly low number of people are interested in following the lives and habits of the rich for the most practical and beneficial reasons: studying the habits of the rich is a wise way to reverse engineer wealth and success.

The honest truth is that many people are more interested in observing and living vicariously through the wealth of others than they are learning about how to get there themselves. (Perhaps that is why an alarmingly high number of Americans have less than $50,000 saved for retirement.)

So what’s the root cause of culture’s misplaced priorities?

Seven Habits of the Rich to Incorporate to Build Wealth

The truth is that our culture has adopted and embraced all of the wrong symbols of wealth. A high credit score is really an “I love debt” score. A new leased vehicle in the driveway every two or three years is really a sign that its driver prefers operating a vehicle in the most expensive manner possible. And large suburban mini-mansions with several extra rooms are still just as empty and hollow as the hearts of their owners.

If you’re tired of simply watching of the lives of the rich on TV and want to build wealth yourself, studying the habits of the rich is a great place to start. Read the following seven habits of the rich, slowly incorporate them into your lifestyle, and start building wealth.

Prioritize Saving Money

In The Millionaire Next Door, the late Thomas Stanley surveyed a panel of average everyday millionaires to find common characteristics among what turned out to be a widely varied cohort. Among many habits of the rich that Stanley discovered, a focus on saving money above all else was key.

Across the board, first generation wealthy people developed their wealth thanks to long-term saving discipline and dedication to living a frugal lifestyle.

When it comes to choosing between saving and discretionary spending on things like new cars, larger homes, lavish vacations, or expensive clothing, a majority of wealthy people choose the former. At the same time, wealthy people value quality over quantity, i.e. they prefer to own fewer possessions of high quality rather than many possessions of lesser quality.

Avoid Debt as Much as Possible

While it may be true that debt can help you get what you want even if you can’t afford to buy it with cash, it is equally true that excessive debt is one of the top barriers to building wealth. Buying anything using debt is inefficient, more costly, and it limits your ability to build your retirement portfolio, own real estate, or start a business.

Some wealthy people enjoy trying to beat the system and leverage others’ money to their advantage, but it’s worth noting that a majority of wealthy people prefer to avoid this kind of unnecessary risk. In other words, there are far more people who actually develop wealth by following The Millionaire Next Door model than people who follow the model of leveraging others’ money touted by Robert Kiyosaki in Rich Dad Poor Dad.

Maintaining low levels of debt, if any, is one of the hallmark habits of the rich. It puts them in position to take advantage of new and unexpected opportunities to grow their wealth. Perhaps this is way a majority of first generation wealthy people are business owners.

Interestingly, the presence of debt often serves as an unexpected litmus test for whether a person is truly wealthy or just living a wealthy lifestyle. Like Dave Ramsey likes to say, “You can find out who is skinny dipping when the tide goes out.”

Drive Used Cars

One of the most surprising habits of the rich is the overwhelming tendency to drive used vehicles. The average millionaire rarely, if ever, purchases a brand new car, allowing others with far less wealth to absorb the harsh hits of depreciation during the first 2-4 years. Then they buy well-maintained used luxury vehicles with cash.

Maintain Good Physical and Mental Health

It may appear that many wealthy people are workaholics, but the truth is that hard work and good physical and mental health are not mutually exclusive. In fact, maintaining good physical health through diet, exercise, and self-care remains one of the most common habits of the rich.

Want to become wealthy? The best way to get rich is to study and implement the habits of the rich yourself. This article will give you everything you need to get started, whether it's time management tips, health tips, improving productivity, how to save money, how to build multiple income streams, and much more!
In particular, starting the day off with a focus on health is one of the hallmark habits of the rich. A recent article in Business Insider outlined the habits of several wealthy people. John Paul DeJoria, the man behind Paul Mitchell hair products, begins each day with quiet meditation. Birch Box executive Brad Lande begins his morning with hot tea and yoga. Kevin O’Leary, the investor made famous in Shark Tank, starts his day with a 45 minute workout.

The reason behind such health-consciousness is simple: it is foolish to gain wealth if you do not maintain adequate health in order to live a long and enjoyable life.

Read two non-fiction books each month

Among the main habits of the rich, ongoing learning and growth is a consistent priority across the board. It’s not uncommon for people who have accumulated wealth to read two or more non-fiction books each month in an effort to learn new things.

For many people, the habit of reading and implementing new ideas served as the impetus for growing their brand or starting a business in the first place.

Build multiple streams of income

Of the most common habits of the rich, the development of multiple income streams separates the financially independent from typical high-earners. These forms of income vary greatly, from active to passive, and include the following:

  • Investment income via dividends
  • Owning real estate bought with cash
  • Developing a product
  • Owning a business (or multiple businesses)

The time and effort required to build these income streams is usually a heavy sacrifice initially. But there is no question that it pays off.

Give generously

Despite a report in The Atlantic which claimed the wealthy only give 1.3 percent of their annual income to charity, it is important to remember that large variances and anomalies tend to skew these types of statistics.

Ultimately, the main reason behind why so many wealthy people do give generously is that they have developed a healthy, well-adjusted attitude toward money. Psychologically-speaking, they understand that helping others who are in need is rewarding and self-satisfying. Simply put, it makes them happy.

One thought I heard on giving has always stuck with me. I don’t recall who said it, and I’m paraphrasing, but here is the basic idea: It is difficult to receive anything in life with a tightly closed fist.

How can you apply the habits of the rich in your life?

Studying the habits of the the wealthy has a very limited payoff without application. As in most endeavors, you can get started by chasing after the lowest hanging fruits.

If you’re not in the habit of saving and investing money, you need to take definitive steps toward gaining control of your cash flow. If you’ve never made a budget or analyzed your current financial situation, that is an easy place to start.

One of the simplest ways to gain a birds-eye view of your financial big picture is by signing-up for my favorite FREE financial tool, Personal Capital. With Personal Capital, you can monitor your spending by category, track all of your debt and assets, and even receive a personalized review of your finances. Get it here!

If you’re looking for a quick win, you can join thousands of others who have trimmed their budget of unwanted and unused recurring subscription services by using the FREE Trim Financial Manager. When you sign-up, Trim will review your regularly-recurring transactions, negotiate for better rates on your behalf, and even help you cancel unwanted subscriptions for you. You can learn more about Trim here.

Developing better habits may seem unlikely or even hopeless if you find yourself struggling with the burdens of debt. Refinancing is not the silver bullet to debt problems; in fact, it just serves to lessen the symptoms of the underlying problem. But if you’re paying sky-high interest rates, reducing them is an incredibly smart way to jump start a rapid repayment plan.

If you have high-interest student loan debt, I recommend giving LendEDU the opportunity to review your situation and provide options. If you have 90 seconds, you can fill out a quick form now and receive quotes from up to 12 different lenders without affecting your credit score one bit. If you still owe a sizable amount on your Associates, Bachelors, or Masters degree loans, this is literally one of the easiest ways you can free up money in your budget.

Finally, with mortgage rates likely to continue their recent slow rise, now is the time to consider refinancing and locking in a better rate, especially if this has been on your radar for a while. The two companies I recommend most to gather your options are LendingTree and GuideToLenders. Both can match you up with the most competitive rates for which you qualify and help you save thousands of dollars over the lifetime of your mortgage.

From there, start adding new habits to your daily routines. Go for an evening walk, grab a new non-fiction book at the library, and start practicing silence and solitude.

Remember, the common thread in all of the habits of the rich shared above is intentionality. Act consciously and deliberately and you can achieve great success!

How many of the habits shared above do you currently practice in one form or another? What other habits do you think wealthy people have in common?

Want to become wealthy? The best way to get rich is to study and implement the habits of the rich yourself. This article will give you everything you need to get started, whether it's time management tips, health tips, improving productivity, how to save money, how to build multiple income streams, and much more!

Student Loan Debt – 3 Overlooked Factors to Consider Before Borrowing

Only a few generations ago, the average high school graduate dreamed of entering the work force and securing a long-term job following graduation. A high school diploma was a ticket to a good life. Over time, the Associate’s and Bachelor’s degrees, respectively, became the new entry level standard, and dreams were adjusted. Still, higher education remained affordable for the average student who was willing to work to pay for her education. Today, however, fewer and fewer high school graduates are able to cast their dreams of continuing their post-high school education without taking on student loan debt.

The average high school student is inundated with information on student loans, yet they often remain unsure about which voices to trust. FAFSA information packets and misleading online banner ads regarding student loan forgiveness serve only as faint reminders that all student loan borrowers are obligated to repay their debt. In the end, the promise of an education combined with hope leads most borrowers to act without truly considering the consequences. For many students, the options are clear: take on student loan debt to pay for their education or miss the boat entirely.

Entering into student loan debt is a big decision for all students. Consider these critical factors before you borrow to finance your education!When I graduated high school, I found myself in this position. Despite having earned a full-tuition academic scholarship and a few other small scholarships, I did not have any means other than student loans to pay for room and board. Since I was ambitiously pursuing what amounted to a triple major, anything beyond working weekends was out of the question. I felt stuck, but I felt I had no other choice but to take a chance in that moment and hope that it would pay off.

Related: Escape From Student Loans: How Two Educators Paid of $17,831.65 in 54 Days

For any college student who is considering student loan debt to finance his education, cautious consideration of the potential ramifications is critical. Among several factors, the following three factors should be afforded special consideration by all would-be borrowers.

1. Opportunity Cost of Student Loans

Rising student loan payments represent a growing percentage of the average college graduate’s monthly budget. When I graduated college in 2009, my monthly student loan payment accounted for 11% of my monthly net income. Despite the growth of income sensitive repayment plans, other graduates may face much less favorable repayment terms. This forces many young people to make difficult decisions, including whether to

  • invest in their company 401k or pay extra on their student loans and forfeit a company match
  • continue renting longer than their parents did in order to pay down their debts
  • delay marriage and starting a family due to debt concerns
  • seek traditional employment rather than start a business due to lack of start-up funding and income-related concerns

Critics of student lending raise the point that many students are essentially tricked into a leap-before-you-look decision when the time comes to take out student loans. At age 18, most students lack the maturity and financial savvy to understand the long-term ramifications of their decision; at the same time, the industry has no problems with holding students accountable for repaying their debts.

2. Student Loan Debt Default

The impact of student loan debt stretches beyond missed opportunities and dreams deferred. According to a study, which ranked all 4,544 schools throughout the United States eligible for federal student loans according to federal student loan default rates, approximately 11.3% of all student loan borrowers default on their student loan obligations.

Entering into student loan debt is a big decision for all students. Read on to see why a major study reveals that you should consider a school's default rate before choosing a school.This statistic is alarming, as default occurs only when a borrower fails to make a minimum required monthly payment for 270 days. Many borrowers are not aware that default comes with severe consequences, including lost eligibility for deferment, wage garnishment, and sometimes severe damage to credit scores.

Though the approach might appear pessimistic to many borrowers, greater consideration should be given to college and university default rate statistics. I’m not advocating a plan-to-fail approach to choosing a university. However, the correlations as revealed in the study between school type and default rates is too clear to ignore. Not surprisingly, the type of school (public vs. private, less than 2 years, 2-3 years, 3-4 years, profit vs. non-profit) is one predictor of potential default likelihood that potential student loan borrowers should consider.

Among several takeaways from the study, the following are noteworthy:

  • For-profit schools boasted the highest default rates.
  • Public school default rates are higher than those of private schools. *Note: Community colleges are included in public school default rate calculations.
  • Students who attended non-degree granting schools were most likely to default on student loans.
  • Larry’s Barber College in Chicago, IL held the highest student default rate at 48.9%.
  • Many schools maintained 0% default rates.

You can review the study further or download and manipulate the data further here.

3. Interest Rates

Student loan interest rates have faded in and out of the American consciousness for years. Fortunately for current borrowers, the days of 6.5% interest rates on Subsidized Loans are a thing of the past. Despite improved rates over the past few years, would-be borrowers aren’t doing themselves any favors by taking student loans, especially when unsubsidized loans begin accruing interest earlier than subsidized loans.

Interest rates for loans first disbursed on or after July 1, 2016 are as follows (Source –

Loan Type 2016–17 Interest Rate 2015–16 Interest Rate
Direct Subsidized Loans (Undergraduate) 3.76% 4.29%
Direct Unsubsidized Loans (Undergraduate) 3.76% 4.29%
Direct Unsubsidized Loans (Graduate) 5.31% 5.84%
Direct PLUS Loans (Graduate and Parents) 6.31% 6.84%


To Borrow or Not to Borrow

Though today’s students enjoy favorable student loan rates, a growing job market, and plenty of reason for hope, student loans remain a double-edged sword. All would-be borrowers would be wise to consider their student loan needs and all options before borrowing. The opportunity cost of borrowing to complete higher education can be costly, and as the aforementioned study illustrates, the consequences of student loan default are serious.

Thanks to Drew Cloud at The Student Loan Report for working with me to put this article together.

Do you have student loan debt? Did you consider default rates, interest rates, and other factors before you decided to borrow? 

How to Make the Most of Your Tax Refund

Tax refund: Next to the words “pay day” and “debt free,” these are my two favorite finance-related words. Whether my annual tax refund is a modest sum or a mid-size windfall, I am always happy to see my refund directly-deposited into my checking account. Admittedly, knowing how to make the most of your tax refund can be a daunting task.

Still haven’t submitted your 2016 tax returns? If you have a simple return, such as a 1040-EZ, I recommend completing your simple return with today. You can complete your Federal return for FREE and receive free support along the way. And FinanceSuperhero readers can receive a discount on state returns by using this link – $6 Off State Filings With Coupon Code “6OFFSTATE”.

If you’re planning to complete a 1040A or require additional schedules, the team at Liberty Tax has local offices in your area to help you every step of the way. Other tax preparation services come and go, but LibertyTax has been helping people file their taxes the easy way since 1997.

Receiving a tax refund is a great opportunity to improve your financial outlook. Follow these 9 pro tips to make the most of your tax refund!

The FinanceSuperhero Guide to Making the Most of Your Tax Refund

Assuming you have a tax refund coming your way, you could be on the verge of changing your financial picture.  With great opportunity comes great responsibility! The following advice will help you to make the most of your tax refund and make significant progress on your financial journey. I recommend following the steps in numerical order.

1. Give a Portion of Your Tax Refund to a Charitable Organization

Longtime readers will not be surprised that I am suggesting giving as the first step to make the most of your tax refund. As previously mentioned, Mrs. Superhero and I have placed Giving at the top of our monthly budget. Giving aligns with our values, and helping others provides us with much more satisfaction and enjoyment than buying more stuff or eating delicious food.

I strongly believe that giving 10% is the best way that we can make a charitable contribution prior to reaching financial independence (at which time we will significantly increase our giving). We have always done this, dating back to the time when we faced a mountain of debt, and we continue to do so today, even though we are only a few months away from carrying no debt other than our mortgage.

Why? As I mentioned, we believe helping others is both a calling and the most satisfying use of our money. Giving is also a strong reminder that money is not something to be hoarded out of greed. We want to value money and practice good stewardship, but we also want to remain far removed from the love of money.

Many people reject giving in favor of keeping their money strictly to themselves. Ironically, it is usually these same people who senselessly give their money to big banks and other financiers in the form of outlandish interest payments on cars, boats, and other stuff.

Personally, I would rather give in a meaningful way. Even if you give 1% of your tax refund, you will help others and begin to change the way you view money.

2. Increase Your Savings and/or Emergency Fund

When looking to make the most of your tax return, simply saving money can be a wise choice.
When looking to make the most of your tax return, simply saving money can be a wise choice.

After supporting societal progress by giving, use your tax refund proceeds to improve your liquid savings. Unless you are an extremely high income earner or have a stable passive income stream, you absolutely must have an Emergency Fund. If you do not have one, consider this a full-blown, alarm-sounding crisis that must be addressed immediately! Statistically-speaking, there is close to a 100% chance that you will experience some form of an emergency within the next decade, so be ready!

While I recommend maintaining an Emergency Fund of at least 3-6 months of minimum living expenses, you may also wish to establish an additional Opportunity Fund. I do not specifically recommend amounts or figures for this fund, and you may wish to skip it entirely in favor of moving onto Step 3. However, an Opportunity Fund could allow you to make a fun, somewhat impulsive decision without any accompanying feelings of guilt or regret.

3. Get out of Debt – Once and For All!

After you have given and increased your security via your Emergency Fund, you are fully-prepared to take on the primary barrier standing in the way of Financial Independence: Debt.

The sooner you eliminate your non-mortgage debts, the sooner you free a significant portion of your monthly income and simultaneously gain the freedom to invest in tax-advantaged retirement accounts. Both the Snowball and Avalanche methods are valid means to achieve debt freedom. For the purposes of this post, I am less-concerned with the method you implement to eliminate your debt; just get it done. You may get the push you need if you make the most of your tax refund in this way!


4. Invest in Tax-Advantaged Investments

The real fun begins when you no longer have non-mortgage debt. If you are free from the shackles of debt, the next optimal use for your tax refund is to maximize your retirement contributions. For the purposes of this limited space, ensure you are maximizing employer-offered plans, specifically if they offer a match, and then move onto your Roth IRA.

Want to make the most of your tax refund? Opening an IRA or taxable brokerage account with Betterment is a smart way to maximize the impact of your refund.
Betterment returns vs. US Market and Typical Investor Returns (Credit: Betterment)

If you’re looking for an easy to use platform for investing, Betterment could be the solution for you. Their Tax-Coordinated Portfolio works to maximize your earnings and minimize tax burdens across all types of accounts, including taxable accounts, Roth IRAs, and traditional IRAs. It is simple to sign-up or rollover an account, select a portfolio of ETFs, and be on your way toward earning better returns right away.

Compared to other platforms, the Betterment portfolio is designed to achieve optimal returns at every level of risk. Through diversification, automated rebalancing, better behavior, and lower fees, the Betterment approach to investing can help you generate 2.9% higher returns than a typical DIY investor.

Make the most of your tax refund and start investing with Betterment by signing up today!

5. Contribute to Your Children’s College Funds

If you do not have children, skip ahead to Step 6. If you have children, you need to learn the nuances of the Coverdell ESA (Education Savings Account, also nicknamed the Education IRA) and 429 plan. The ESA has income and contribution limits (currently $2,000 per year), but I recommend you start with the ESA in most circumstances, if eligible.

The important thing to understand is that minimal contributions to these vehicles will place you in a position to send your children to college without the burden of student loans if you begin early.

Related PostEscape From Student Loans: How Two Educators Paid Off $17,831.65 in 54 Days

6. Destroy Your Mortgage Debt

Pause with me for a moment and imagine a life without a mortgage payment. If you can’t imagine it, check out the FREE E-book, How to Hack Your Mortgage and Save Thousands, written by my friend Andrew at FamilyMoneyPlan. This is the plan he and his wife used to wipe out their $320,000 mortgage in 6 years.

What could you do with an extra $1,000 per month? $2,500? $5,000? I just felt an overwhelming sense of excitement  and peace typing these words. The next time I visit my doctor and have my blood-pressure checked, I am going to visualize the wonders of a mortgage-free life to improve my numbers.

For the average family, mortgage interest represents the second-largest expense that they will pay in their entire lifetime. In some cases, total mortgage interest paid on a 30 year mortgage can be approximately 75-80% of total principal, even at today’s advantageous interest rates! Make the most of your tax refund to accomplish progress on an annual basis and you could shave several years off your mortgage, especially if you are already paying extra on principal on a monthly basis.

7. Invest in Non-Retirement Funds and/or Real Estate

If you have made it to Step 7, please allow me to offer my congratulations. With no debt whatsoever, healthy savings, and kids’ college covered, you are poised to generate significant wealth. At this stage, you may have achieved Financial Independence, depending upon your lifestyle.

I recommend using tax refund money to invest in simple index funds at this stage. A modest tax refund sum is enough to get you started with many index funds. Adopt a long-term approach, relax, and watch your money grow.

Similarly, this is the time to invest in real estate, if interested. Becoming a landlord isn’t for everyone, and paying a property manager could eat into your net profit from owning a rental property. However, a rental property can yield some of the highest annual investment returns if managed well and purchased at prices below market value.

Want to make the most of your tax refund? Investing in real estate with Fundrise is an exciting option for investors in 2017.Fortunately, today’s investors can invest in real estate without the hassle of becoming a landlord or hiring a property manager. Fundrise offers real estate investment options with low entry costs.. As of February 2017, they offer three eREITs for new investors: the West Cost eREIT, the Heartland eREIT, and the East Cost eREIT. It is amazing that technology has brought common investors like you and me the opportunity to invest in multi-million dollar buildings half way around the country!

Even if you’re on the fence about real estate investing or just not quite ready to dip your toe in the water, I recommend signing-up with Fundrise today – it is 100% FREE, with no obligation, and in doing so, you’ll position yourself to learn more and possibly avoid wait lists.

8. Improve the Value of Your Primary Home

At this stage, true fun begins. When you are financially well-poised for the future, a tax refund represents an opportunity to both invest and add joy to your life simultaneously. This is the time to make improvements around your home which increase your happiness and feature a high return on investment.

Good Investments: new front door, landscaping, deck or patio, kitchen or bath remodel, walkway lighting

Bad Investments: swimming pools, utility sheds

9. Build Sinking Funds for Bucket List Items

Last, but not least, comes additional saving for specific purchases. If you make it down to Step 9 when determining how to implement your tax refund, you are an authentic Superhero. I recommend establishing separate sinking funds for a variety of priorities, such as vacations, new car purchases, secondary homes, or major home additions.

The purpose of a sinking fund is to plan for future purchases which are far off in the future. At this stage, you do not want to be fooled into getting back into debt or be caught off guard by large, necessary expenses. With a sinking fund, you won’t be financially caught off guard when your house needs a new roof, your furnace fails, or your vehicle sputters and dies.

Are You Ready to Make the Most of Your Tax Refund?

A tax refund is a great opportunity to get ahead in your finances. I am confident that you will not fail to cover all of your bases by following these steps. Depending upon where you are in your journey toward Restoring Order to Your World of Finances, you may wish to skip steps or modify the order. For example, renters may wish to place saving for a home down payment in the Steps.

If you haven’t yet filed your 2016 tax returns, be sure to check out or LibertyTax today. Either way, careful consideration of your circumstances will put you on the path to make the most of your tax refund this year!


Note: This post was last updated on February 14, 2017.

Readers, did you receive a tax refund this year? Are you currently awaiting a refund? How do you plan to make the most of your tax refund?

Escape From Student Loans: How Two Educators Paid Off $17,831.65 in 54 Days

Money has a funny way of making people emotional. We are elated when we earn a raise, achieve a promotion, or unexpectedly win the lottery. On the other hand, losing money lets the wind out of our sails in a hurry. Today, the ongoing escape from student loans is one such soul-crushing experience for millions of people.

If two educators can escape from student loans - over $17,000 in only 54 days - so can you! Read on to see how they did it and how you can do it, too. In 2016, the average college graduate  graduated owes $37,172 in student loan debt; No wonder many pundits believe the student loan bubble may be the next to burst!

Since April 2016, I have been free from the shackles of student loan debt. No longer sending hundreds of dollars to Sallie Mae each month is a great feeling. My wife and I are now able to invest more freely, increase our lifestyle spending, and stress less about money.

I wish our escape from student loan debt were nothing but rainbows and butterflies, but good things rarely come without a grind.

The Back Story

In May 2014, I graduated with an MA in School Leadership. When I entered repayment that November, I owed $19,724.96. My first statement revealed that a ten year repayment plan would cost a total of $27,178.23In that moment, I was determined to ensure that my $18,000 educational investment would not become a $27,000 one!

The problem? I still owed over $5,000 on my undergraduate student loans. Yes, I was stupid. The kind of stupid with several zeros and even a comma involved. I took on additional student loan debt without paying off my existing student loans.

The Escape Begins

In the summer of 2015, I began a new job as an entry-level school administrator. In October 2015, we got down to business. That month we paid just over $4,300 toward my undergrad loans and tacked on an additional $829.00 in November to wipe out these loans for good! A three paycheck month, combined with extreme frugality, provided the funds for us to do so, even on two educator’s modest salaries.

Our momentum was halted a bit in December and January, but we paid an additional $2,338.79 on the grad school loans in February 2016. I don’t remember seeing the inside of a restaurant, Target, or Banana Republic during this time.

It was around this time that I truly began to hate my job. I realized my passion just wasn’t in this job, and I knew I had to get out. I didn’t get along well with my boss, to say the least, so the departure was going to be an easy one, even if it needed to wait a few months.

We paid minimum payments, an additional $1,100 in March and an additional $4,000 in April, thanks to another 3 paycheck month. It felt like we were on a roll in some respects, but the finish line still seemed like a faint mirage on the horizon; after all, we still owed $10,166.37 even after several months of living a scorched-earth lifestyle.

We reminded ourselves: slow and steady wins the race. I was content to push slowly and steadily toward the finish line and rest in the comfort of this phrase. 

Sitting on Savings

A quick look at our emergency fund and sinking funds revealed that we could make a final payment of $10,166.37 without exposing ourselves to the unnecessary risk of an underfunded emergency fund. Upon realizing this, I told my wife that this monster payment would be the best early birthday present I could receive. Without hesitation, she gave me the green light, and just like that, our escape from student loans was complete!

Our Escape From Student Loans

If you were expecting a magical solution to student loan debt, I’m sorry – no such solution exists.

We tackled my student loans with major aggression. It was hard work. But we also made smart choices.

First, we recognized the problem and reviewed our budget. We scaled back almost every unnecessary expense: dining out, expensive groceries and toiletries, entertainment, and beer.

Next, we pressed pause on all spending other than what was necessary to survive. During those months, we paid our mortgage, utilities, required minimum payments. And we bought basic groceries. That’s it.

In addition, we stopped investing, other than our required pension contributionsThis was a risk that worked for us, and fortunately, the markets were down overall during this brief time.

Finally, we bet on ourselves and utilized a large portion of our emergency savings. This money was sitting idly in an account while we were paying 6.5% interest. This gamble also paid off for us.

How You Can Escape From Student Loans

To be perfectly clear: nothing about our escape from student loans was special. We sacrificed, scratched, clawed, and busted our butts to do it.

You can do it, too!

It may take longer for you to knock out your student loans, or you may do it even faster. But don’t let student loans knock you down. If you worked hard to earn your degree, you deserve the chance to work for yourself now; the sooner you quit paying for that fancy piece of paper, the better!

I know many people who owe far more in student loan debt than I ever did. Maybe that’s where you find yourself. If so, accept that it’s going to take time, make a plan to break free, and also make sure you’re not overpaying on your interest rates.

If I still had student loans, I would absolutely refinance them with SoFi. For anyone paying ludicrous interest rates of 6.5% and above, a quick refinance will save you hundreds of dollars. And if you sign-up using any of the SoFi links on this page, SoFi will automatically sweeten the deal and give you back $100 cash. Currently, SoFi offers fixed rates at 3.375% and variable rates as low as 2.355% if you sign-up for Auto Pay. In a matter of minutes, they can help you refinance your federal or private student loans, consolidate multiple loans, and get on a quicker path toward freedom.  

Click here to refinance your student loans with SoFi and receive $100 today!

Readers, have you experienced any recent triumphs over debt? What were the keys to your success? How did you stay motivated? If you are still in debt, when do you plan to eliminate student loans or other debt?

Good Debt vs. Bad Debt – The Great Debt Debate

What’s the quickest way to start a heated debate among a room full of personal finance experts? I’m not certain, but starting a debate on the concept of good debt vs. bed debt must rank pretty highly on the list.

What factors matter the most when it comes evaluating debt? What determines good debt vs. bad debt? The answer isn't as complex as it seems.Opinions on the matter run the full gamut. Some people believe that debt is a tool to be utilized to finance a lifestyle – because #YOLO. Others would not borrow money for any reason whatsoever because debt is dumb and Dave Ramsey says so.

The trouble with such extremism, aside from being wildly unappealing, is the fact that a one-size-fits-all approach rarely works in life. The good debt vs. bad debt debate is no different.

What kind of debts are we discussing? What are the terms? What is the purpose behind the act of borrowing? Will the items or experiences being financed maintain value? What is the opportunity cost?

All of this is enough to make heads spin.

Traditional Stance on Good Debt vs. Bad Debt

Ask five of your closest friends whether they have any debt, and you’ll likely hear variations of the following:

“No, we’re not in debt. We just have a car payment, student loans, and our mortgage.”

“We have a few credit card balances – does that count?”

Answers like these can help us to begin to frame the issues surrounding good debt and bad debt.

Traditionally speaking, the average Baby Boomer defines good debt as money owed on an appreciating asset or an experience (i.e. education) which is likely to yield financial returns or benefits. Bad debt is defined as debt incurred on depreciating assets, i.e. does not yield positive cash flow.

Over time, however, these definitions have ridden the wave of cultural change. Today, in fact, some experts preach that all debt is bad.

Today’s Views

Grandma and Grandpa may hold a traditional view on good and bad debt, but to their instant gratification seeking offspring, all bets are off. “If debt allows me to get what I want when I want it, it must be good!” they reason. This is a classic example of the leap-before-you-look mentality, and the eventual landing usually isn’t a pretty one.

Generational assumptions aside, we find ourselves at a tipping point in the Great Debt Debate. With any luck, the following may shed further light upon the issue.

Less About the Debt, More About the Debtor

Debt is a undoubtedly a complicated concept. Perhaps the only piece of the puzzle which is more complicated is the debtor himself.

When we borrow money, we make a statement about ourselves. We claim confidence in our ability to pay back our debts. This confidence can be fully justified or woefully misplaced.

Suppose for a moment that an uber-wealthy  entrepreneur purchases a beach home on Lake Michigan and takes out a mortgage. Is this a good debt or bad debt? In this case, if she has the regular income and liquidity to pay off the mortgage in a relatively short period of time, we may safely consider this a healthy debt. After all, the home is likely to appreciate over time, and the mortgage provides additional flexibility to divert funds to other investments.

Let’s change a few pertinent facts in the above scenario for a moment. Suppose our entrepreneur is already upside down on her Chicago high-rise condo and is quickly burning through liquid cash like a raging wild fire due to a poor quarter for her business. We’re looking at a bad debt in this case, in all likelihood.

When evaluating debt, the circumstances of the debtor are everything.

Critical Circumstances

So where does this leave us? What circumstances impact whether a debt is good or bad?

1. Equity

Years ago I purchased a 2008 Honda Accord from my grandparents. The vehicle was worth $17,000 at the time. I put down nearly half of the cost and financed the rest. We quickly paid the vehicle loan off, but even if we hadn’t done so, we were protected by built in equity. If at any time things went south, we could have sold the vehicle, paid off the remainder of our loan, and used the remaining cash to buy a beater car and buffer our emergency savings.

Equity is a fine mitigator of risk associated with debt.

2. Consistent discretionary income

When it comes down to the bottom line, the scariest thing about debt is the prospect that we might not be able to pay it off. As we’ve seen, equity is a great hedge against this possibility, but consistent discretionary income is even more valuable.

For the family who routinely spends all of its earnings, it doesn’t take much for what was once a manageable debt to become a significant problem. But for those who maintain sizable wiggle room on a monthly basis – say 5-10% of monthly take home pay – a healthy buffer can eliminate the stress of difficult periods which stretch the budget.

3. Liquidity (Cash is King)

Dave Ramsey begins every radio show with the reminder that “Debt is Dumb” and “Cash is King.” I feel the latter is correct, but the former requires modification. “Some Debt is Dumb” is more appropriate.

Again, assuming reasonable interest rates, debt becomes a problem when the debtor cannot meet his obligations. A healthy level of liquid cash acts as an additional line of defense. With cash in the bank, the debtor has options if debt obligations become cumbersome. He may sell the asset, rely on discretionary income to avoid touching liquid savings, or draw on his savings.


If you find yourself in debt or are considering entering into a debt relationship, consider the aforementioned factors to evaluate the situation. Generally speaking, based upon the established criteria above, the following are examples of good debt and bad debt.

Good Debt

1. Mortgage on primary residence

2. Home equity loan for home improvement purposes* (Depending upon interest rates, expected rate of return on the project, and existing equity)

Bad Debt

1. Student loans

2. Auto loans

3. Revolving credit card balances

4. Cash advance and pay day loans

Readers, what is your position in the “good debt vs. bad debt” debate? How do you evaluate whether a debt is good or bad? 

Change is Hard

January is a month for hope and optimism. You wouldn’t know it based upon the doom and gloom floating around in the newspapers and social media this year, but most folks are as optimistic as ever during the first month of a new year. They know change is hard, but emotions fly high.

The distance between change and complacency is small - a single step in the right direction. Change is hard because complacency is easier. But you can win!Many people hit the gym and begin a new diet with dogged determination that they will finally lose that extra weight. Others pledge to finally start saving for their dream purchase or investing for their retirement. Some people pledge to reestablish their priorities with regard to work, family, friends, and leisure.

The month of January represents new beginnings. A clean slate. A chance to start afresh and anew.

It is an opportunity to implement changes big and small. Yet January also brings about a sobering reminder each and every year:

Change is hard.

Figuratively speaking, the distance between change and complacency is very short. The difference is a single step in the direction of our goals. But taking that single step is often challenging.

Change is hard, complacency is easier

The human search for homeostasis has led us to really enjoy our comforts. I know that is why I love dining out, even if at McDonald’s. It is why I love sports, TV, and movies. It is why men love their recliners. These things provide comfort.

In order to change, you and I have to exit that comfort zone. On purpose. Repeatedly. We have to force ourselves to live on the edge of discomfort. Sometimes we may have to face our fears.

To lose a few pounds, I need to stay away from the comforts of restaurants and overindulgence in dairy, fried foods, and beer, and increase my intake of lean protein, vegetables, and fruits.

If saving money is my goal, I need to take a long, hard look at my spending habits and trim away waste. Psychologically, this type of self-correction is very necessary yet incredibly difficult to achieve with honesty and integrity.

Improving the performance of my investments is a difficult change to enact. It reveals that simple human desire and motivation are not always enough if we seek complex change. Sometimes we can do everything right and still fall short of our goals. This leads us to fear failure and avoid change.

Even our goals change from time to time. For example, a few months ago on my 30th birthday, I set five primary investment goals for the next year:

1 – Max out both of our IRAs for 2016. $11,000 total investment.
2 – Invest a minimum of $2,000 with Fundrise.
3 – Grow my overall account value with Betterment.
4 – Increase our overall net worth by 50%.
5 – Set a target date for early retirement and formulate a plan to get there.

Related Post: The Fundrise eREIT: Accessible Real Estate Investing for the Average Investor

As I write, we are most likely to fail at goals 1 and 3. Instead, due to changing circumstances, we opted to invest funds earmarked to achieve these goals in finishing our basement. These circumstances even led us to make a surprising decision – we borrowed money to complete this project. Gasp, I know. But the extremely low interest rate combined with maintaining liquidity were just too significant to pass up.

Even the decision to change our investment goals and instead invest in our home was not an easy one. My wife and I went back and forth on it many times, even though we knew that completing the project would instantly increase the value of our home by an additional 40-50% beyond the initial investment.

We hemmed on and hawed over a decision that would increase our net worth? Yup.

Change is hard because the act of change admits that are wrong in the present. Sometimes this hefty dose of humility can be too much to accept.

Change is hard because it is an act of giving up something to gain something else. And we don’t know if we all we hope to gain will be better than that which we are giving up.

Change is hard because we are often left swimming upstream, fighting against the currents of life. Two or three steps forward followed by one step backward only feels like progress for so long to our instant-gratification-seeking hearts.

Change is hard because it requires renewed commitment on a daily basis. As my father-in-law often says, there is no glory in yesterday’s victory.

Change is hard because we do not always instantly see the fruits of our labor. This is why your local gym is full in January and half empty again by the end of February.

So how can you and I change?

Change Comes From Within

I’m reminded of a vivid training scene in Rocky III, in which an over-the-hill Apollo Creed is training Rocky Balboa for his rematch with Clubber Lang. Creed pummels Rocky with a steady stream of right hooks, and Rocky’s lifeless approach to improving his technique leads Creed to question, “What’s the matter with you?!”

Rocky responds, “Tomorrow. We’ll do it tomorrow.”

A fired up Creed denounces this attitude, stating repeatedly, “There is no tomorrow!”

Rocky continues to go through the motions in training until he hits the ultimate low point. Creed deserts him and states, “It’s over.” Rocky is really on the ropes this time.

When he needs it the most, Rocky’s wife, Adrian, provides a dose of wisdom.

“Apollo thinks you can do it. So do I. But you gotta wanna do it for the right reasons. . . Not for the people, not for the title, not for the money, or me – but for you.”

“And if I lose?”

“Then you lose. But at least you lose with no excuses. No fear. And I know you could live with that.”

I think I could live with that, too. Can you?

How are you striving to change in 2017? How will you sacrifice to make it happen?